> For the complete documentation index, see [llms.txt](https://docs.keystonefi.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.keystonefi.xyz/reference/whitepaper.md). # Whitepaper *Keystone Finance · Whitepaper v1.1 · 2026 · Kamran Choudhry* *** ksUSD earns the carry Solana's markets already produce: perp funding, jitoSOL staking, and USDC lending. Deposit USDC, hold ksUSD, and the share price rises as that carry accrues. No token emissions, no off-chain Treasury bills, and every position is on-chain. One program, one vault, one share mint. The 51-month backtest targets \~11% net APY, with a \~4–5% floor when funding is thin. ## I. What ksUSD is Solana's markets pay carry continuously: perps settle funding hourly, jitoSOL compounds each epoch, lending reprices each slot. The dollars sitting on top of it collect none of that, and the few that pay yield source it off-chain. ksUSD collects the on-chain carry directly, hedged so SOL price moves cancel, and passes it through the share price. ## II. How it works ksUSD runs a delta-neutral basis trade with two modes, set by the funding rate. Transitions are automatic — the on-chain smoothed funding signal decides the mode and a keeper bot executes the switch — filtered by a 7-day funding mean and a 12-hour minimum hold. Net SOL exposure stays near zero in normal basis.
Smoothed perp funding decides the mode: at or above +2% APR the vault moves to Normal basis (short plus staking); when funding is thin or negative it moves to Parked (USDC lending). Transitions are automatic, driven by the funding signal; reverse basis is dormant in v1.

One on-chain signal — smoothed funding — decides the mode.

| Mode | When | Position | Earns | | ---------------- | ------------- | ---------------------------------------------------------------------------- | ---------------------------------- | | **Normal basis** | funding ≥ +2% | long jitoSOL spot (unlevered) + short SOL-PERP on Phoenix at 1×, USDC margin | jitoSOL staking + funding received | | **Parked** | otherwise | all capital in USDC lending (Kamino) | lending yield (\~4–5%) | The +2% threshold covers the round-trip perp fee (\~10 bps) plus the switch cost before the basis is worth running. Below it, ksUSD parks in USDC lending instead of trading at a loss. Reverse basis — harvesting negative funding by borrowing and shorting the underlying — is built but dormant in v1. Negative funding and the borrow rate tend to spike together, so the net rarely clears cost; Parked covers that range instead. It turns on only if the funding-minus-borrow spread clears a set hurdle. See [Strategy & Modes](/how-it-works/strategy-and-modes.md#design-decisions). ## III. The ksUSD share ksUSD is a non-rebasing share token. Your balance is fixed, and the share price rises as carry accrues. You redeem against NAV: instant from the liquidity buffer, queued for larger size. It is a share on a hedged carry vault, not a $1-pegged stablecoin. It carries no fixed yield, holds no RWA or T-bills, pays no emissions, and takes no view on SOL price. The architecture is small on purpose: one program, one vault, one rule set. ### Yield sources & fees
In normal basis the yield stacks perp funding on top of jitoSOL staking; in parked it is USDC lending. Lending is the floor, so the dollar is never idle.

Funding varies; staking and lending are the steady floor.

| Source | Active when | Contribution | | --------------- | ------------------------- | ------------ | | Phoenix funding | Normal basis | 5–15% APR | | jitoSOL staking | Normal basis (spot leg) | \~5.8% APR | | USDC lending | Buffer + reserve + parked | \~4–5% APR | | Fee | Rate | | ------------ | -------------------------------------- | | Management | **0%** | | Performance | **20% above HWM** (net-new gains only) | | Reserve skim | **5% of perf** → on-chain reserve fund | | Withdrawal | **0%** | ## IV. Why Solana The design needs a few things on one chain, close enough to compose: * An on-chain perp. Phoenix Perps settles on-chain, so the vault opens its hedge by calling into it with USDC margin from its own program. That direct composition is the Solana-specific part. * Funding it receives, rather than a pool borrow-fee it pays. * A high-yield LST and USDC lending: jitoSOL held unlevered for staking, Kamino for the buffer and parked NAV. * Fees small enough that regular rebalancing stays economic. On Ethereum these don't line up: gas makes rebalancing expensive, the deepest perps are off-chain or on separate domains, and LST yield, funding, and lending live apart. The spot leg also simply earns more here — Solana staking plus MEV tips put jitoSOL near \~5.8%, structurally above Ethereum LSTs' \~3%, so the unlevered leg carries more before any composability or fee edge. ## V. Performance — daily backtest (Feb 2022 – Apr 2026, 51 months) Phoenix launched Dec 2025, so the backtest uses historical on-chain SOL-perp funding (plus a Binance proxy) as a stand-in. Figures are the v1 live set (normal + parked); reverse is excluded. | Variant | Gross | Net | Modeled max DD | | ------------------------- | ------ | ---------- | --------------------- | | **Normal + parked (v1)** | 19.82% | **15.57%** | −0.57% | | Public conservative claim | — | **\~11%** | — | | sUSDe benchmark | 6.7% | 5.4% | bleeds in low funding | | USDC lending benchmark | — | \~4% | flat floor | The \~11% claim takes the model's 15.57% down for a \~20% margin-capital haircut (USDC posted as perp margin doesn't earn the basis) and execution friction. USDC lending is the benchmark — what the same capital would otherwise earn — and ksUSD's parked floor is about that rate. **Methodology:** funding is an on-chain SOL-perp archive for 793 of 1550 days plus a Binance × empirical-ratio proxy elsewhere; 7-day mean for mode classification; 5 bps perp fee + 10 bps slippage per side + 20–40 bps per switch. Modeled max DD is funding-only; under stress a month can run −2% to −5% versus the model's −0.6%. Detail: [historical-simulation.md](/reference/historical-simulation.md). ## VI. Resilience — redemption and risk Share price is NAV ÷ shares, marked from on-chain balances and oracle-priced legs. Keeper attestation is bounded by a per-hour change cap and an oracle sanity band, so it can't mark NAV past what the chain shows. A 10%-of-NAV buffer covers normal redemptions instantly; larger ones burn at the locked price and settle against realized unwind proceeds through a permissionless crank. In stressed markets a queued payout can come in below marked NAV. | Risk | Mitigation | | --------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | Smart-contract | Pre-mainnet audit scheduled; devnet only until then. | | Perp-venue dependency | Phoenix is the only hedge venue, so an exploit, outage, or socialized loss hits ksUSD directly. Phoenix is in private beta, and trader onboarding needs an Ellipsis builder-access grant — a live external dependency. | | Counterparty | Phoenix, Ember, Kamino, Jupiter, Jito. No single one holds all NAV; the reserve fund absorbs first loss up to its size. | | Oracle | Pyth reads gated by 5-min staleness and 2% confidence; outages past that can still cause loss. | | Funding compression | Parked earns only \~4–5%, so the \~11% target isn't guaranteed in a flat regime. | | jitoSOL depeg | Marked at the stake-pool rate; a 5% depeg auto-pauses and arms `emergency_close`. Slashing is unhedgeable. | | Liquidation | The Phoenix short is over-margined so a SOL rally is absorbed before rebalancing. | | Keeper outage | Buffer withdrawals stay open; rotation and queue processing pause until cranking resumes. Anyone can crank. | Fallbacks are built in. Funding compression parks the vault. Perp-venue trouble triggers an oracle-divergence auto-pause and a permissionless `emergency_close`. A depeg auto-pauses. Wind-down turns the vault into a pro-rata USDC claim. Redemption works whether or not the team is present. ## VII. Position and outlook | | Yield source | Coverage | Transparency | Venues | | -------------- | -------------------------------- | ------------------------------------- | ------------------------ | ------------------------------------- | | **ksUSD** | Perp funding + staking + lending | Positive-funding basis + parked floor | Fully on-chain | Phoenix, Kamino, Jito — Solana-native | | Ethena (sUSDe) | Delta-hedged perp funding | Long-basis only | Off-chain CEX, attested | CEXs + custodians | | MakerDAO / Sky | Stability fees + RWA/savings | n/a | On-chain + off-chain RWA | RWA counterparties | | Perena (USD\*) | Swap fees + stable yields | n/a | On-chain | Solana AMM/DEX | Ethena showed the demand for a yield-bearing dollar, and the limit of a one-directional one: through 2025 sUSDe rode positive funding to \~15%, then fell to \~3.7% as funding compressed.¹ ksUSD earns the basis when funding pays and parks when it doesn't. The longer goal is a dollar whose yield comes from, and can be checked against, the market it lives on. *Simulated performance does not predict future results.* ¹ *Ethena figures are directional, per public dashboards from the backtest era.* *** [app.keystonefi.xyz](https://app.keystonefi.xyz) · [docs.keystonefi.xyz](https://docs.keystonefi.xyz) · *Simulated figures only — not investment advice.*